Asia Ports: India And Indonesia Top Markets For Growth

India and Indonesia are our top markets for ports in Asia in terms of growth outlook and industry size, with strong demand for maritime facilities and a sizable transport infrastructure deficit driving investment. Overall, the region's port infrastructure industry is expected to nearly double by 2026.

Asia's ports infrastructure sector is among the largest and fastest-growing in the world, with burgeoning trade flows and economic development driving the need for larger and more efficient maritime facilities. For emerging markets in Asia, ports are essential catalysts for economic growth by enabling access to global trade flows and supply chains, and facilitating exports and foreign investment. Port infrastructure is also an important component of China's Belt & Road (B&R) initiative, with Chinese companies building, financing or taking stakes in numerous projects across South and Southeast Asia. Overall, we expect that Asia's ports infrastructure industry will nearly double in nominal value terms from USD18.1bn in 2016 to USD31.0bn in 2026.

China, India And Indonesia Dominate Sector Value

Asia - Ports Infrastructure Industry Value, USDbn

e/f = BMI estimate/forecast. Source: National sources, BMI

India, Indonesia Most Promising Markets

India and Indonesia have the region's second- and third-largest port infrastructure industries respectively and are the most promising markets for the sector in Asia. A convergence of factors demanding and supporting ports development in the two countries include:

Rising Trade Flows: The volume of port traffic has grown substantially in India and Indonesia over the past 15 years, placing strain on existing facilities. Container traffic in India rose from 3.8mn twenty-foot equivalent units (TEUs) in 2000 to 11.9mn TEUs in 2014; in Indonesia, the volume increased from 2.5mn TEUs to 11.7mn TEUs over the same period.

Logistical Shortfalls: Existing transport infrastructure in India and Indonesia is poorly developed and managed, posing significant logistical challenges to trade and supply chains. Our Operational Risk team notes that many of India's ports are ageing and approaching capacity, while Indonesia's ports suffer from severe congestion and are operating above capacity.

Government Focus: The Indian and Indonesian governments have made infrastructure development a core policy objective, in line with a regional trend of countries directing political focus on infrastructure.

Rising Traffic Volumes

India and Indonesia - Port Container Traffic, TEUs

Source: World Bank, BMI

India's port sector is the second-largest in Asia and expected to grow at an average of 5.5% in real terms annually between 2017 and 2021. The government launched the Sagar Mala initiative in 2014 to upgrade the country's ports infrastructure and create Coastal Economic Regions that integrate ports with surrounding transport and industrial facilities. India's infrastructure industry is relatively open to foreign companies - in May 2017, the government's National Investment and Infrastructure Fund signed an agreement with DP World to develop USD1bn worth of ports and logistics projects. According to our Key Projects Database, there are at least 28 major port projects worth more than USD9.9bn in the construction or tendering stages.

Indonesia's ports infrastructure industry is the third-largest in Asia and forecast to grow at an average annual rate of 5.3% in real terms between 2017 and 2021. The government has IDR700trn (USD55.4bn) worth of port developments lined up as part of President Joko Widodo's vision of creating a "global maritime axis". Priority is being placed on upgrading and expanding existing seaports, as well as launching a nationwide marine-highway system to improve domestic transportation. Development of the ports sector is of high strategic and economic importance for Indonesia, an archipelago nation with around 18,000 islands where land transport modes are of limited use outside of the main islands.

Asia's Ports Landscape

Asia - Port Infrastructure Growth and Industry Size

Source: BMI

Muted Growth In Well-Developed Markets

Despite playing important roles in the global shipping industry, we expected muted growth rates for the ports industries in more mature markets like China, Japan, South Korea and Singapore. China, in particular, will remain as the largest ports market in Asia, but growth is forecast to average only 1.9% annually between 2017 and 2026. Despite the tremendous shipping volumes handled by these markets, their existing ports facilities remain well-equipped to handle projected levels of traffic, and are ranked among the most efficient in the world. Indeed, our Key Projects Database shows most projects in those markets are incremental upgrades.

B&R Initiative Supporting Port Infrastructure In South And Southeast Asia

The development of ports infrastructure in South and Southeast Asia will be supported by the "Maritime Silk Road" component of China's B&R initiative, which focuses on upgrading ports and oceanic shipping networks across Asia to boost trade. For emerging and frontier markets, ports are especially important for facilitating trade and investment, and ultimately supporting economic growth. Across South and Southeast Asia, port investments will be accompanied by industrial parks and supporting road, rail and power infrastructure. Bangladesh, Pakistan and Sri Lanka are focal points of B&R, being the homes of six China-supported port projects that we expect will serve as strategically important nodes of the Maritime Silk Road. Although only a small proportion of the projects in our database are port projects, many are part of wider industrial and transport corridor plans.